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Who can you ‘Trust’?

Naomi was one of three trustees of a family trust. The trust owned a house. The other two trustees were Naomi’s daughter Hayley and Hayley’s husband, Scott. Hayley and Scott were in the middle of an acrimonious divorce, and they wanted to sell the house. The trust’s financial adviser had arranged house and contents insurance for the property. The three trustees were ‘joint insureds’.

In 2017, the house was vandalised and burgled. The burglar damaged the house and stole tools and computer equipment. The trustees made claims under both of the trust’s insurance policies. Because of the acrimony between them, Scott and Hayley were communicating separately with the adviser who was managing their insurance claims.

In relation to the property claim, the insurer agreed to Scott’s request to cash settle so that Scott could carry out the repairs himself. The insurer made the cash payment once it had received a discharge form that appeared to have been signed by both Scott and Hayley. However, Hayley had not signed the form; she realised Scott must have forged her signature. In relation to the contents claim, the insurer made a payment into the bank account Scott had provided.

The insurer had not known of Scott’s fraud in advance. It was too late for the insurer to claw back either payment. Hayley and Naomi were not happy. Naomi complained to FSCL about the adviser. She pursued a complaint about the insurer in another forum.



The adviser agreed with the insurer that the insured client was the trust itself. By paying the money to one of the trustees of the trust (Scott), legally the insurer had paid the client, said the adviser. The adviser’s view was that Naomi and Hayley needed to recover their share of the insurance payment directly from Scott.



We agreed with the adviser that the legal position is that where a claim is payable under a joint insurance policy, the claim is satisfied when the payment is made to any one of the ‘joint insureds’. That principle applied to both the property claim (where we noted that just as the insurer had no prior notice of Scott’s fraud, nor did the adviser), and the contents claim. We considered that the remedy available to Naomi and Hayley was to pursue Scott. On the face of it, Scott needed to account to his co-trustees for the money he had received. It was Scott’s actions that had caused the loss to Naomi and Hayley.

However, we also noted that Hayley’s lawyer had emailed the adviser before the insurance payout was made, to say that the contents claim should not be cash settled. We considered that the adviser should have forwarded that email to the insurer. Naomi and Hayley had been inconvenienced by the adviser’s failure to do so, as the insurer might have acted differently had it received that email. We also considered that the adviser could have done more to keep Naomi and Hayley ‘in the loop’ about the contents claim.



We negotiated a settlement between Naomi and the broker. The broker agreed to pay Naomi the sum of $3,000 in full and final settlement of her complaint.


Insights for participants

Participants should exercise caution when dealing with parties to an acrimonious relationship breakdown. In most such cases, it may be prudent to ensure both parties are copied in to all correspondence, and to check that they have both parties’ agreement on important action or issues.